Cenvat credit on capital goods survives procedural lapses when factory receipt and manufacturing use are established.

Cenvat or Modvat credit on capital goods is not lost merely because the prescribed declaration was not filed, where receipt in the factory and use in manufacture of taxable final products are established. Imported capital goods and accessories may also qualify even if original invoices are unavailable, if duty payment can be verified from customs records and the goods were received for use in manufacture. The commentary further notes that commencement of production is not a precondition to credit where the goods are meant for manufacturing use, and that one-to-one correlation between each item received and each final product is not required unless the statute specifically mandates it. Procedural irregularities alone do not defeat substantive credit entitlement.

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Issues: (i) Whether Cenvat credit on capital goods received in the factory and used for manufacture of taxable final products could be denied merely because the declaration under the relevant rules was not filed. (ii) Whether credit on certain imported capital goods and accessories could be denied for want of original invoices or on the ground that the float glass plant had not commenced production, and whether one-to-one correlation was required.

Issue (i): Whether Cenvat credit on capital goods received in the factory and used for manufacture of taxable final products could be denied merely because the declaration under the relevant rules was not filed.

Analysis: The capital goods were admittedly received in the factory and were subsequently used in the manufacture of taxable output. The denial rested only on non-filing or delayed filing of declaration under the Modvat/Cenvat procedure. Such procedural non-compliance did not negate the substantive entitlement when the duty-paid nature and receipt for use in the factory were not in dispute.

Conclusion: The credit could not be denied merely for failure to file the declaration, and the assessee was entitled to the credit on this issue.

Issue (ii): Whether credit on certain imported capital goods and accessories could be denied for want of original invoices or on the ground that the float glass plant had not commenced production, and whether one-to-one correlation was required.

Analysis: The goods were shown to have been imported and received in the factory. The objection regarding absence of original invoices was not sufficient where duty payment could have been verified from customs records. The fact that the float glass plant had not yet started production did not justify denial of credit when the goods were meant for and later used in manufacture. No one-to-one correlation between each item received and each final product was required for availing credit on capital goods, and the documentary irregularities noted were not fatal. The Tribunal also accepted that the assessee's conduct was not contumacious.

Conclusion: The credit on this issue was allowable, and the denial was unsustainable.

Final Conclusion: The assessee succeeded on the substantial credit disputes, with relief granted on the admissible credit and consequential benefit, while the appeal was only partly disallowed for the item not pressed.

Ratio Decidendi: Cenvat or Modvat credit on capital goods cannot be denied when receipt in the factory and subsequent use in manufacture are established merely because of procedural lapses such as non-filing of declarations or defective documentation, and no one-to-one correlation is required unless the statute so provides.

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